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Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience:  Nine years individual income tax preparation and consulting
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Good morning, I have a question about a 401k hardship witdrawal.

Customer Question

Good morning, I have a question about a 401k hardship witdrawal. I make about 35k a year, this year I took out about $4000 from my 401k in a hardship witdrawal and they took out 10% of federal taxes on it which was fine to me. I looked it up and I'm in the 25% tax bracket married filing separately so how much will I have to pay the IRS at the end of the year?
Submitted: 6 years ago.
Category: Tax
Expert:  Jacy replied 6 years ago.

Hello,

 

Unfortunately, if you are in the 25% bracket, you will owe another $1,000 dollars in tax on this withdrawal. The hardship rules are there to allow you access to the money, but don't get you out of the income tax.

 

There are a few exceptions to the 10% penalty. They include disability, medical expenses that exceed 7.5% of your adjusted gross income, and separation from service after age 55.

 

Sorry for the bad news. Let me know if you need any more information.

 

Thank you,

 

Jacy

Customer: replied 6 years ago.
Even if they took out the 10% before they cut me the final check? And if I claim my newborn son that could wipe out what I owe is that correct?
Expert:  Jacy replied 6 years ago.

Hi,

 

The 10% tax withheld from your check only covers the penalty. You still must include the $4,000 as income and pay any additional tax it creates.

 

If you add a dependent, this will give an exemption of $3,650, and the child tax credit of $500. This should offset all of the tax on the $4000. (If you file Married Joint, the tax credit it $1,000. In general, you will pay less tax filing jointly.)

 

Thanks again,

 

Jacy

 

 

 

 

Jacy and other Tax Specialists are ready to help you
Customer: replied 6 years ago.

One more question and I will leave you alone I promise, lol

I am divorced and I pay child support to my ex wife. Can I claim my child or if I do can she come back and get me in trouble with the IRS?

Expert:  Jacy replied 6 years ago.

Hello,

 

Usually the decision of which parent can claim a child is put into the divorce agreement. If this was not included in your agreement, then the custodial parent gets the dependent. Per the IRS, the custodial parent is the one the child spends the most time with.

 

If you are not the custodial parent, to claim the dependent, you need to get permission with a form 8332 signed by the custodial parent and attach it to your return. Here is a link to the form:

 

http://search.irs.gov/web/query.html?col=allirs&charset=utf-8&qp=&qs=-Wct%3A%22Internal+Revenue+Manual%22&qc=&qm=0&rf=0&oq=&qt=8332

 

If you claim the child without this permission (assuming you are NOT the custodial parent), then yes, if she also claims the child, the IRS will contact you. You will lose the exemption, credit, and owe penalties.

 

Also, if you are legally divorced by the end of this year, you should be filing Single, unless you are the custodial parent, then you can file Head of Household.

 

Thanks again for your questions. I don't mind follow up questions. Taxes and divorce issues are tricky.

 

Jacy